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TORONTO - The Canadian dollar firmed against the greenback on Thursday, hitting a 5-1/2-month high as a dearth of domestic economic data this week cleared the way for it to extend its recent run higher.

Some weakness in the U.S. dollar also benefited the Canadian dollar after data showed U.S. consumer spending rose less than expected in May.

The loonie has only declined in one session this week so far, continuing the gains it made last week on stronger-than-expected Canadian inflation data, which sparked doubts about how long the Bank of Canada will be able to stick with its neutral stance.

With little on the domestic economic calendar this week,analysts expect the currency will drift around current levels,but they say it is unlikely to make further sustainable gains in the longer term without a change in the central bank's stance.

In the shorter term, $1.07 will be the important level to watch to see where the Canadian dollar might go from here, said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary.

"There's the potential to see a break of $1.07, but I think we're getting really close to being cautious about finding abase and starting to see a pattern here," Smith said.

"It's getting close to that point where people that are continuing to be extremely bullish on the loonie might begetting a little nervous if $1.07 continues to hold."

The Canadian dollar was at $1.0712 to the greenback, or 93.35 cents US, stronger than Wednesday's close of $1.0722, or 93.27 cents US. The loonie hit a session high of $1.0705, its strongest level since early January, when the currency was in the midst of a sharp sell-off.

The Bank of Canada will release a monetary policy statement in mid-July, but analysts don't expect to see a change in its tone so soon.

Because of that, "we're getting close to the strongest levels of the loonie we're likely to see over the next few months," Smith said.

Next week's data, including Canadian monthly economic growth and U.S. unemployment, could provide some direction. But the July 1 Canada Day holiday and the July 4 holiday in the United States could make for quiet trading.

Canadian government bond prices were higher across the maturity curve, with the two-year up half a cent to yield 1.114%, and the benchmark 10-year up 22 cents to yield 2.249%.